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Planning for the future.

Arkansas Division of IDS Joins Industry Trend by Merging With State Accounting Firms

FINANCIAL PLANNING isn't just for corporate executives anymore.

More people want it. And, they're finding more ways to get it.

With the popularity of company-sponsored retirement plans like the 401(k) and the desire for more general financial planning education to prepare for retirement, the industry is becoming increasingly competitive.

Traditional financial planning firms are seeing their share of the market shrink as competitors such as accounting firms and in-house company planners provide financial education.

"There are a lot of entities that are diverging onto the financial planning field," says John Kelly of First Financial Planners Inc. in Little Rock. "That's a trend nationally. Accounting firms are trying to merge and be involved, and consulting firms are being set up to educate employees at bigger corporations."

Accounting firms are being hired by more and more companies to provide financial planning services to employees. Or, accounting firms are merging with financial planning firms to provide more services.

In Arkansas, a division of IDS Financial Services Inc. is expanding its tax and business services. The American Express company wants to merge its tax and business services with accounting firms in central Arkansas. Eventually, company officials say, IDS will merge with accounting firms statewide.

John Crawford, division vice president, says a staff of 35 professional accountants will be working under the IDS umbrella by the time the mergers are complete.

So far, IDS is the only financial planning company in the state seeking to merge with accounting firms.

"We plan to be one of the major players in the accounting industry," Crawford says. "It's a natural progression for IDS because tax services are a major factor in helping our clients meet their financial goals."

Signing Up

Already the tax, accounting and consulting practice of Dennis Devine of Heber Springs has joined the IDS division office in Little Rock.

The attractiveness of an accounting firm working under the umbrella of a financial planning company is a necessary evolution in both businesses, Devine says.

This trend -- more prominent nationally, say Arkansas financial experts -- has emerged from the go-go days of the mid-1980s.

"Industry-wide, financial planning got a bad name then," Devine says. "What happened out of the 1980s was accountants began dealing with clients who wanted to do financial planning."

So, accountants were being pushed to get their securities licenses.

Meanwhile, the financial planning industry was received with skepticism by the public, Devine says.

"People did not trust financial planners," Devine says. "What they finally realized was a free financial plan was opening the door to having a lot of people come in and cram stuff down their throat for the commissions that planners could earn.

"... Well, the accountants were being pushed to get securities licenses. But no accountant works in all areas. Nobody covers all the bases. And we're going to add securities on top of that? No man can serve two masters. They were compromising their ability as accountants if they were going to sell their clients these financial products."

That's not to say all accountants were quick to grab their securities licenses and give investment advice.

"Historically, the relationship between a client and an accountant has been one of objectivity," says Barry Corkern, who operates the financial planning service Barry Corkern & Co. out of Little Rock. "Financial planning services came out of the selling industry. When you're clearly a fee-based financial planner cultivating a practice as I have, you desire an engagement disclosure. I point out that I'm not an accountant. I'm not an attorney.

"I spell out things I do perform and things I don't."

Corkern says he does no accounting work. Instead, he helps a client select a CPA based on a number of factors.

Likewise, many accountants and accounting firms refer clients elsewhere for investment advice.

"The type of financial planning that we do is more involved in how much people need to save so as to have some money at retirement," says Steve Humphries of Frost & Co., an accounting firm in Little Rock. "We do not make investment advice."

Frost & Co. is the largest Arkansas-based accounting firm in the state. Recently, it announced an alliance with the international accounting firm of Moore Stephens in London.

Advantageous Choice?

Would it be advantageous for smaller accounting firms or individual certified public accountants to seek a permanent relationship with financial planning companies?

"In my opinion, no," Humphries says. "You normally do |financial planning~ for high-income individuals, and those people would tend to look at you as a professional or neutral party where you're not selling a product.

"Most high-income individuals already have investor banking relationships."

Still, across the nation many accounting firms are testing the waters in the area of financial planning.

Coopers & Lybrand and Arthur Andersen often are in demand by companies to educate their employees on financial planning.

According to a recent article in The Wall Street Journal, the financial planning division of Arthur Andersen has grown about 20 percent over the past three years. Over the past year, Price Waterhouse reports that its financial planning business has increased a whopping 300 percent.

Crawford believes that by bringing accounting firms in house, IDS can help shed light on the gray area between accountants and financial planners and who does what.

"People are really confused," Crawford says. "We know what people want--a trusted, long-term relationship with their adviser ... Some accounting firms do not have anyone to show you, 'Here's the next step. Here's how you do it.'

"It would be like going to the doctor and the doctor gives you a diagnosis but does not tell you what to do about it. You're overweight. You have high blood pressure. That's what the diagnosis shows. The accounting firm does not have anyone to show you how to get your blood pressure down and how to take your medication.

"That's what the financial planner brings to the equation. It's the completion of the process."
COPYRIGHT 1992 Journal Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:merging of Arkansas division of IDS Financial Services Inc. with accounting firms to provide more efficient financial planning services
Author:Webb, Kane
Publication:Arkansas Business
Article Type:Industry Overview
Date:Nov 9, 1992
Words:995
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